Question 1

Which of the following will increase investment spending in the economy, holding everything else constant?

Accepted Answer

A)  an increase in the federal government surplus 
B)  an increase in the budget deficit 
C)  an increase in consumer dissavings 
D)  an increase in transfer payments 
A)  an increase in the federal government surplus 
B)  an increase in the budget deficit 
C)  an increase in consumer dissavings 
D)  an increase in transfer payments

Question 2

Which of the following is a true statement about the length of recessions and expansions in the United States economy?

Accepted Answer

A)  Prior to 1900, the length of expansions equaled the length of recessions. 
B)  Prior to 1900, the length of expansions were much less than the length of recessions. 
C)  Prior to 1900, the length of expansions were much longer than the length of recessions. 
D)  Prior to 1900, the length of recessions were brief and almost nonexistent. 
A)  Prior to 1900, the length of expansions equaled the length of recessions. 
B)  Prior to 1900, the length of expansions were much less than the length of recessions. 
C)  Prior to 1900, the length of expansions were much longer than the length of recessions. 
D)  Prior to 1900, the length of recessions were brief and almost nonexistent.

Question 3

The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects.

Accepted Answer

A)  government 
B)  households 
C)  banks 
D)  firms 
A)  government 
B)  households 
C)  banks 
D)  firms

Question 4

Which of the following would you expect to increase the equilibrium interest rate?

Accepted Answer

A)  an increase in the percentage of income after net taxes that households save 
B)  an increase in the budget deficit 
C)  a decrease in the profitability of investment projects firms are considering 
D)  the government begins running a budget surplus 
A)  an increase in the percentage of income after net taxes that households save 
B)  an increase in the budget deficit 
C)  a decrease in the profitability of investment projects firms are considering 
D)  the government begins running a budget surplus

Question 5

The U.S. economy experienced a period of relative stability from 1950-2007.

Accepted Answer

A) True 
 B)False

Question 6

As the economy nears the end of an expansion, interest rates usually ________ and wages rise more ________ than prices.

Accepted Answer

A)  rise; rapidly 
B)  rise; slowly 
C)  fall; rapidly 
D)  fall; slowly 
A)  rise; rapidly 
B)  rise; slowly 
C)  fall; rapidly 
D)  fall; slowly

Question 7

If you invest $10,000 in a bond that earns 8% interest per year, how many years will it take to double your money?

Accepted Answer

A)  1 year and 3 months 
B)  2 years and 6 months 
C)  8 years 
D)  8 years and 9 months 
A)  1 year and 3 months 
B)  2 years and 6 months 
C)  8 years 
D)  8 years and 9 months

Question 8

Which of the following is most likely to be able to sustain economic growth in an economy?

Accepted Answer

A)  sustained increases in the labor force participation rate 
B)  technological change 
C)  increases in capital per hour worked 
D)  accumulations of economic resources 
A)  sustained increases in the labor force participation rate 
B)  technological change 
C)  increases in capital per hour worked 
D)  accumulations of economic resources

Question 9

Which of the following is an example of human capital?

Accepted Answer

A)  a computer 
B)  a factory building 
C)  a college education 
D)  a software program 
A)  a computer 
B)  a factory building 
C)  a college education 
D)  a software program

Question 10

Since the 1950s

Accepted Answer

A)  the United States has not experienced a business cycle. 
B)  U.S. business cycle fluctuations have becomes more volatile. 
C)  U.S. business cycle fluctuations have become milder. 
D)  U.S. business cycle fluctuations have not changed. 
A)  the United States has not experienced a business cycle. 
B)  U.S. business cycle fluctuations have becomes more volatile. 
C)  U.S. business cycle fluctuations have become milder. 
D)  U.S. business cycle fluctuations have not changed.

Question 11

Which of the following would increase public saving?

Accepted Answer

A)  an increase in taxes 
B)  an increase in transfers 
C)  an increase in government purchases 
D)  All of the above would increase public saving. 
A)  an increase in taxes 
B)  an increase in transfers 
C)  an increase in government purchases 
D)  All of the above would increase public saving.

Question 12

Equilibrium in the loanable funds market determines

Accepted Answer

A)  the nominal interest rate. 
B)  the current interest rate. 
C)  the real interest rate. 
D)  the expected interest rate. 
A)  the nominal interest rate. 
B)  the current interest rate. 
C)  the real interest rate. 
D)  the expected interest rate.

Question 13

The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase during the next decade, and due to these higher deficits, "the nation's capital stock ultimately would be smaller, and productivity and income would be lower than would be the case if the debt was smaller." This higher budget deficit would be represented graphically by

Accepted Answer

A)  a shift in the supply curve for loanable funds to the right. 
B)  a shift in the supply curve for loanable funds to the left. 
C)  a movement to the right along the supply curve for loanable funds. 
D)  a movement to the left along the supply curve for loanable funds. 
A)  a shift in the supply curve for loanable funds to the right. 
B)  a shift in the supply curve for loanable funds to the left. 
C)  a movement to the right along the supply curve for loanable funds. 
D)  a movement to the left along the supply curve for loanable funds.

Question 14

Centrally planned economies tend to grow more quickly than market economies.

Accepted Answer

A) True 
 B)False

Question 15

Potential GDP is the maximum output a firm is capable of producing.

Accepted Answer

A) True 
 B)False

Question 16

The sum of public and private saving in an economy is equal to

Accepted Answer

A)  Y - C - T. 
B)  T - TR - G. 
C)  Y - C - G. 
D)  I - C - G. 
A)  Y - C - T. 
B)  T - TR - G. 
C)  Y - C - G. 
D)  I - C - G.

Question 17

Potential GDP is defined as

Accepted Answer

A)  the maximum of GDP that the economy can produce. 
B)  the amount of GDP produced if there is no frictional unemployment. 
C)  the level of GDP attained when all firms are producing at capacity. 
D)  the amount of GDP produced if there is no structural unemployment. 
A)  the maximum of GDP that the economy can produce. 
B)  the amount of GDP produced if there is no frictional unemployment. 
C)  the level of GDP attained when all firms are producing at capacity. 
D)  the amount of GDP produced if there is no structural unemployment.

Question 18

Purchases of which of the following goods would be dramatically reduced during a recession?

Accepted Answer

A)  tomatoes 
B)  ink pens 
C)  gasoline 
D)  refrigerators 
A)  tomatoes 
B)  ink pens 
C)  gasoline 
D)  refrigerators

Question 19

When production in an economy grows more quickly than the population in that economy, which of the following must be occurring?

Accepted Answer

A)  Real GDP is falling. 
B)  Incomes are growing at a slower rate than the population. 
C)  Real GDP per capita is rising. 
D)  Living standards are falling. 
A)  Real GDP is falling. 
B)  Incomes are growing at a slower rate than the population. 
C)  Real GDP per capita is rising. 
D)  Living standards are falling.

Question 20

Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds.

Accepted Answer

A)  demanders; suppliers 
B)  suppliers; demanders 
C)  suppliers; suppliers 
D)  demanders; demanders 
A)  demanders; suppliers 
B)  suppliers; demanders 
C)  suppliers; suppliers 
D)  demanders; demanders

Exam 21: Economic Growth, the Financial System, and Business Cycles

Which of the following will increase investment spending in the economy, holding everything else constant?

Which of the following is a true statement about the length of recessions and expansions in the United States economy?

The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects.

Which of the following would you expect to increase the equilibrium interest rate?

The U.S. economy experienced a period of relative stability from 1950-2007.

As the economy nears the end of an expansion, interest rates usually ________ and wages rise more ________ than prices.

If you invest $10,000 in a bond that earns 8% interest per year, how many years will it take to double your money?

Which of the following is most likely to be able to sustain economic growth in an economy?

Which of the following is an example of human capital?

Since the 1950s

Which of the following would increase public saving?

Equilibrium in the loanable funds market determines

Centrally planned economies tend to grow more quickly than market economies.

Potential GDP is the maximum output a firm is capable of producing.

The sum of public and private saving in an economy is equal to

Potential GDP is defined as

Purchases of which of the following goods would be dramatically reduced during a recession?

When production in an economy grows more quickly than the population in that economy, which of the following must be occurring?

Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

As the economy nears the end of an expansion, interest rates usually and wages rise more than prices.

Borrowers are of loanable funds, and lenders are of loanable funds.